FxWirePro Call Review: AUD/USD likely to decline further as rising range breaks

Back in November 2017, in an article named, “FxWirePro: Buy Aussie targeting 0.87 against dollar over longer horizon”, available at https://www.econotimes.com/FxWirePro-Buy-Aussie-targeting-087-against-dollar-over-longer-horizon-1024281 we suggested going long in the Australian dollar against the USD. We cited two main reasons for the outlook,

“Technical:

Technically speaking, the chart clearly shows that the Australian dollar, which has been in a downtrend since 2013, has already broken above the downtrend line in February this year.  In September this year, Aussie reached a high of 0.806, which was the highest level of the currency since May 2015. It has undergone a correction since but now hovering very close to the rising uptrend line.

Fundamental:

The economy has been improving steadily over the past years, recovering from the commodity sector slump and mining bust. The Reserve Bank of Australia itself acknowledged the strength in the non-mining sector and with mining sector recovering the Australian economy set to increase the pace. For example the unemployment rate, after peaking 6.4 percent in late 2015, it has declined to 5.4 percent in October.”

In our last call review in March, https://www.econotimes.com/FxWirePro-Call-Review-AUD-USD-nearing-key-support-line-resumption-of-broader-bull-trend-likely-1225534 we hailed the bull call and expressed confidence as the range trade continued.

However, instead of the resumption of the bull trend from the range low, the AUD/USD has broken below the range. Though the momentum (very usual in a breakout) has not been there, it looks increasingly likely that AUD/USD would break further below.

However, this break doesn’t threaten our longer-term bullish outlook for the AUD/USD and the stop loss for the trade is still far away at 0.68 area. Nevertheless, this break demands a re-assessment and we believe that one can take up one of the three possible actions,

• Maintain the long positions that we entered around 0.763 and keep buying AUD/USD at a lower price, which would bring down the average price of purchase for the longer horizon call.
• Square off positions at 100 pips loss and wait for the opportune moment to renter bullish positions.
• Play short term short side. If this is your preference, our calculations suggest that AUD/USD can decline to as low as 0.708 area.  The interim targets are 0.74 area and 0.72 area.